COARSE THINKING AND PERSUASION* SENDHIL MULLAINATHAN JOSHUA SCHWARTZSTEIN Downloaded from https://academic.oup.com/qje/article/123/2/577/1930852 by Harvard Law School Library user on 15 June 2021 ANDREI SHLEIFER We present a model of uninformative persuasion in which individuals “think coarsely”: they group situations into categories and apply the same model of in- ference to all situations within a category. Coarse thinking exhibits two features that persuaders take advantage of: (i) transference, whereby individuals transfer the informational content of a given message from situations in a category where it is useful to those where it is not, and (ii) framing, whereby objectively useless information influences individuals’ choice of category. The model sheds light on uninformative advertising and product branding, as well as on some otherwise anomalous evidence on mutual fund advertising. I. INTRODUCTION Most societies devote huge resources to persuasion (McCloskey and Klamer 1995). Selling, advertising, political cam- paigns, organized religion, law, much of the media, and some ed- ucation are devoted to changing beliefs in a way advantageous to the persuader. Persuasion is not simply an expenditure of re- sources: the content of the message crucially shapes its effective- ness.1 But what constitutes persuasive content? Economists usually assume that only one type of persua- sive content matters: objectively useful information. Stigler (1987, p. 243) defines advertising as “the provision of information about the availability and quality of a commodity.” Economists typ- ically model persuasion, including advertising (Stigler 1961), political campaigns (Downs 1957), and legal argument (Milgrom * This paper replaces an earlier draft with the same title, as well as “Per- suasion in Finance” by Mullainathan and Shleifer. We are grateful to Nicholas Barberis, Gary Becker, Dan Benjamin, Daniel Bergstresser, Olivier Blanchard, Lauren Cohen, Stefano DellaVigna, Daniel Gilbert, Edward Glaeser, Xavier Gabaix, Matthew Gentzkow, Simon Gervais, Robin Greenwood, Richard Holden, Emir Kamenica, Lawrence Katz, Elizabeth Kensinger, David Laibson, Owen Lamont, Steven Levitt, Ulrike Malmendier, Richard Posner, Andrew Postlewaite, Matthew Rabin, Christina Romer, Jesse Shapiro, Jeremy Stein, Rene Stulz, Richard Thaler, Robert Waldmann, Glen Weyl, Gerald Zaltman, Eric Zitzewitz, three anonymous referees, and especially Nicola Gennaioli, Giacomo Ponzetto, and the fourth anonymous referee for helpful comments. We also thank Michael Gottfried, Tim Ganser, and Georgy Egorov for excellent research assistance. Schwartzstein acknowledges financial support from an NSF graduate fellowship. All errors remain our own. 1. A vast advertising literature makes this point (see, e.g., Zaltman 1997; Sutherland and Sylvester 2000). Bertrand et al. (2006) present some clear evidence that persuasive content matters in a field experiment using loan advertisements by a South African consumer lending institution. C 2008 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology. The Quarterly Journal of Economics, May 2008 577 578 QUARTERLY JOURNAL OF ECONOMICS and Roberts 1986b; Dewatripont and Tirole 1999), as provision of information. In some models, such as those of Grossman and Hart Downloaded from https://academic.oup.com/qje/article/123/2/577/1930852 by Harvard Law School Library user on 15 June 2021 (1980), Grossman (1981), Milgrom (1981), Crawford and Sobel (1982), Okuno-Fujiwara, Postlewaite, and Suzumura (1990), and Glazer and Rubinstein (2001, 2004), the persuader uses informa- tion strategically, but conveys information nonetheless. Psychologists and marketers understand persuasion quite differently. They argue that people evaluate various propositions or objects using representativeness, metaphors, analogies, and more generally associative strategies (Gilovich 1981; Edelman 1992; Kahneman and Tversky 1982; Lakoff 1987; Zaltman 1997). The strategy of persuasion is to take advantage of these mental strategies, which we refer to as coarse thinking, to improve the audience’s assessment of the persuader’s issue or product. In this paper, we present a model of coarse thinking and per- suasion. We distinguish two ways in which persuaders, such as product advertisers, can take advantage of coarse thinking. First, the audience might already have some analogy for the product in mind; it already thinks of the product in terms of something else. In this case, one way to persuade is to advertise attributes of the product that are positively related to quality in the anal- ogous situation. The coarse thinker transfers the informational content of these attributes across analogous situations and so im- proves his view of the product. We call this form of coarse thinking “transference.” Second, and more fundamentally, persuaders may themselves try to shape or create the relevant analogy by advertising at- tributes associated with that desired analogy. This method per- suades successfully when it changes the lens through which a thinker views all features of the product. Following Goffman (1974), we call this form of coarse thinking “framing.” In many instances, successful persuasion takes advantage of both trans- ference and framing, but these forms of coarse thinking are con- ceptually distinct.2 To illustrate these ideas, consider several examples: Alberto Culver Natural Silk Shampoo was advertised with a slogan “We put silk in the bottle.” The shampoo actually contained 2. Recently, the term framing has been used much more narrowly to describe the coding of gains and losses in prospect theory (Kahneman and Tversky 1979). Goffman’s original and broader meaning of framing as a lens or “model” through which the audience interprets data is what we try to capture below. COARSE THINKING AND PERSUASION 579 some silk. During the campaign, the company spokesman con- ceded that “silk doesn’t really do anything for hair” (Carpenter, Downloaded from https://academic.oup.com/qje/article/123/2/577/1930852 by Harvard Law School Library user on 15 June 2021 Glazer, and Nakamoto 1994).3 This example is a relatively pure case of the persuader relying on transference. Culver takes ad- vantage of the co-categorization of shampoo with hair, which leads consumers to value “silk” in shampoo (not very sensible) because they value “silky” in hair. By adding silk to the bottle, Culver ef- fectively transfers a positive trait from hair to shampoo to make its product more attractive. For about forty years, Avis Car Rental advertised itself with the slogan “We are number two. We try harder.” Besides this key message, most ads contain few data. We think of this campaign as a relatively pure case of framing. When Avis was getting started, many of its potential customers knew that it was smaller than Hertz. How the attribute “being second” is interpreted depends on categorization: either negatively as a loser or positively as an underdog. Because the underdog image favors Avis, the campaign primed this frame by stressing the attributes of underdogs (they try harder). The fact that Avis lagged behind Hertz in sales be- came a sign of higher rather than lower quality. Most persuasive messages take advantage of both transfer- ence and framing. Take two examples, one from the economic and one from the political sphere. Over the course of the Internet stock market bubble (1994– 2003), the brokerage firm Merrill Lynch ran six advertising cam- paigns, respectively called “a tradition of trust,” “the difference is Merrill Lynch,” “human achievement,” “be bullish,” “ask Merrill,” and “total Merrill.” The motto of each campaign always appeared in the ad. Roughly speaking, the first two campaigns preceded the bubble, the third and the fourth appeared during it, and the last two ran after the sharp market decline. One way to compare these campaigns is to look at a repre- sentative ad from each. “A tradition of trust” ads often portray a grandfather and a grandson fishing together. The ads talk about slow accumulation of wealth and Merrill’s expertise. The activi- ties of fishing and, even more so, teaching to fish suggest slow- ness, tradition, skill, consistency, and patience. The ads advise on how to protect oneself and one’s family financially. Ads from “the 3. A recent reincarnation of this marketing idea, discovered by inspecting products in a drugstore, is Pure Cashmere Softsoap, which contains “cashmere extract.” Cashmere adds quality to sweaters, not soap. 580 QUARTERLY JOURNAL OF ECONOMICS difference is Merrill Lynch” campaign likewise show grandfathers and grandsons with fishing rods, and they recommend saving. Downloaded from https://academic.oup.com/qje/article/123/2/577/1930852 by Harvard Law School Library user on 15 June 2021 This message changes in 1999. A “human achievement” ad from 1999 shows a twelve-year-old girl wearing a helmet and car- rying a skateboard. The image is much hipper than those from the previous campaigns. The next campaign, from 2000–2001, simply intones: “be bullish.” One ad shows a Merrill Lynch bull wired as a semiconductor board (the word “wired” itself has two mean- ings, connected and hyperactive). The theme of protection is gone; growth and opportunity emerge. After the market declines, Merrill switches to the “ask Merrill” campaign, with its emphasis on uncertainty in the world, and the company’s expertise in protecting and advising its cus- tomers. A representative ad is dominated by a page-sized question mark, invoking insecurity, uncertainty,